UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For the
quarterly period ended: September 30, 2009
or
TRANSITION REPO
RT PURSUANT TO SECTION 13 0R 15(D) OF
THE SECURITIES EXCHANGE
ACT
OF 1934
For the
transition period from _______ to _______
Commission
File Number: 000-51497
BIO-BRIDGE
SCIENCE, INC.
(Exact
name of small business issuer as specified in its charter)
Delaware
|
|
20-1802936
|
(State or Other jurisdiction of
|
|
(IRS Employer
|
incorporation or organization)
|
|
Identification No.)
|
|
|
|
1211 West 22nd Street, Suite 615
|
|
|
Oak Brook, Illinois
|
|
60523
|
(Address of principal executive offices)
|
|
(Zip Code)
|
630-928-0869
(Issuer's
telephone number including area code)
Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days: Yes
x
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
|
Accelerated filer
o
|
|
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicate by
check mark whether the registrant is a shell company: Yes
o
No
x
State the
number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date.
Common
Stock Outstanding as of September 30, 2009: 35,371,009
shares
Bio-Bridge
Science, Inc.
Index to
Form 10-Q
|
|
Page
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and
December 31, 2008
|
3
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Operations for the three month
and nine months periods ended September 30, 2009 and 2008
|
4
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Changes in Shareholders' Equity for
the nine months period ended September 30, 2009
|
5
|
|
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the nine month periods
ended September 30, 2009 and 2008
|
6
|
|
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
7
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
17
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
24
|
|
|
|
Item
4.
|
Controls
and Procedures
|
24
|
|
|
|
Part
II
|
Other
Information
|
25
|
|
|
|
Item
1.
|
Legal
Proceedings
|
25
|
|
|
|
Item
1A.
|
Risk
Factors
|
25
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
25
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
25
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
25
|
|
|
|
Item
5.
|
Other
Information
|
25
|
|
|
|
Item
6.
|
Exhibits
|
25
|
|
|
|
|
SIGNATURES
|
25
|
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,828,389
|
|
|
$
|
1,486,252
|
|
Accounts
receivable, net
|
|
|
372,773
|
|
|
|
340,633
|
|
Inventories
|
|
|
589,799
|
|
|
|
491,347
|
|
Trading
securities, at fair value
|
|
|
156,599
|
|
|
|
115,634
|
|
Prepaid
expenses and other current assets
|
|
|
38,263
|
|
|
|
38,364
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
2,985,823
|
|
|
|
2,472,230
|
|
|
|
|
|
|
|
|
|
|
Property,
plant, and equipment, net
|
|
|
532,563
|
|
|
|
243,507
|
|
Construction
in progress
|
|
|
2,701,475
|
|
|
|
2,676,938
|
|
Land
use right, net
|
|
|
358,652
|
|
|
|
372,696
|
|
Goodwill
|
|
|
243,248
|
|
|
|
243,248
|
|
|
|
|
|
|
|
|
|
|
Total
Long-term Assets
|
|
|
3,835,938
|
|
|
|
3,536,389
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
6,821,761
|
|
|
$
|
6,008,619
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
236,949
|
|
|
$
|
265,682
|
|
Accrued
expenses and other payables
|
|
|
70,367
|
|
|
|
158,686
|
|
Payable
to contractors
|
|
|
44,641
|
|
|
|
185,929
|
|
Due
to related parties
|
|
|
13,991
|
|
|
|
32,189
|
|
Derivative
liabilities
|
|
|
1,021,098
|
|
|
|
-
|
|
Total
Current Liabilities
|
|
|
1,387,046
|
|
|
|
642,486
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 5,000,000 shares authorized, 4,000,000
shares issued and outstanding
|
|
|
4,000
|
|
|
|
4,000
|
|
Common
stock, $0.001 par value, 100,000,000 shares authorized, 35,371,009 and
34,931,009 shares issued and outstanding, respectively
|
|
|
35,371
|
|
|
|
34,931
|
|
Additional
paid-in capital
|
|
|
12,079,300
|
|
|
|
12,912,545
|
|
Preferred
stock dividend, payable in common shares
|
|
|
26,400
|
|
|
|
137,000
|
|
Subscription
receivable
|
|
|
(210,325
|
)
|
|
|
(2,062,670
|
)
|
Stock
to be issued, 5,741,076 and 5,818,276 shares, respectively
|
|
|
4,526,796
|
|
|
|
4,559,056
|
|
Accumulated
other comprehensive gain
|
|
|
261,234
|
|
|
|
259,893
|
|
Accumulated
deficit
|
|
|
(11,834,072
|
)
|
|
|
(11,000,931
|
)
|
Total
Bio-Bridge Science, Inc. shareholder’s equity
|
|
|
4,888,704
|
|
|
|
4,843,824
|
|
Noncontrolling
interest
|
|
|
546,011
|
|
|
|
522,310
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
5,434,715
|
|
|
|
5,366,134
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
6,821,761
|
|
|
$
|
6,008,619
|
|
See
accompanying notes to the condensed consolidated financial
statements
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Three
months ended
September
30,
|
|
|
Nine
months ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
142,901
|
|
|
$
|
113,314
|
|
|
$
|
582,925
|
|
|
$
|
120,741
|
|
Cost
of good sold
|
|
|
(92,052
|
)
|
|
|
(89,348
|
)
|
|
|
(376,780
|
)
|
|
|
(92,196
|
)
|
Gross
profit
|
|
|
50,849
|
|
|
|
23,966
|
|
|
|
206,145
|
|
|
|
28,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development cost
|
|
|
(69,308
|
)
|
|
|
(19,885
|
)
|
|
|
(148,960
|
)
|
|
|
(76,264
|
)
|
Selling
and distribution expenses
|
|
|
(57,619
|
)
|
|
|
(22,499
|
)
|
|
|
(148,581
|
)
|
|
|
(56,109
|
)
|
General
and administrative expenses
|
|
|
(308,704
|
)
|
|
|
(2,658,966
|
)
|
|
|
(808,109
|
)
|
|
|
(3,103,364
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(384,782
|
)
|
|
|
(2,677,384
|
)
|
|
|
(899,505
|
)
|
|
|
(3,207,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(340
|
)
|
|
|
(798
|
)
|
|
|
(637
|
)
|
|
|
(2,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
of fair value of derivative liability
|
|
|
(958,147
|
)
|
|
|
-
|
|
|
|
268,271
|
|
|
|
-
|
|
Unrealized
Gain(loss) on trading securities
|
|
|
21,779
|
|
|
|
(45,632
|
)
|
|
|
40,965
|
|
|
|
(117,013
|
)
|
Gain
on sale of trading securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,150
|
|
Dividend
income
|
|
|
3,612
|
|
|
|
4961
|
|
|
|
11,719
|
|
|
|
64,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes and noncontrolling interest
|
|
|
(1,317,878
|
)
|
|
|
(2,718,853
|
)
|
|
|
(579,187
|
)
|
|
|
(3,206,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Provision)
benefit for income taxes
|
|
|
2,199
|
|
|
|
-
|
|
|
|
(15,552
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(1,315,679
|
)
|
|
|
(2,718,853
|
)
|
|
|
(594,739
|
)
|
|
|
(3,206,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(income) loss attributable to noncontrolling interest
|
|
|
3,005
|
|
|
|
(2,834
|
)
|
|
|
(23,701
|
)
|
|
|
(2,834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to Bio-Bridge Science, Inc.
|
|
|
(1,312,674
|
)
|
|
|
(2,721,687
|
)
|
|
|
(618,440
|
)
|
|
|
(3,209,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends
|
|
|
(94,650
|
)
|
|
|
(90,000
|
)
|
|
|
(339,400
|
)
|
|
|
(270,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
attributable to common shareholders
|
|
$
|
(1,407,324
|
)
|
|
$
|
(2,811,687
|
)
|
|
$
|
(957,840
|
)
|
|
$
|
(3,479,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share, attributable to common shareholders, basic and
diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding, basic and diluted
|
|
|
35,199,705
|
|
|
|
40,429,285
|
|
|
|
35,116,833
|
|
|
|
37,100,185
|
|
See accompanying notes to the condensed
consolidated financial statements
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
Unaudited
condensed consolidated statements of changes in shareholders’
equity
for
the nine months ended September 30, 2009
|
|
Common Stock
|
|
|
Preferred stock
|
|
|
|
Preferred
stock
dividend
payable in
|
|
|
|
Additional
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
share
|
|
|
|
Paid-in
Capital
|
|
|
|
Comprehensive
Gain
|
|
|
|
Stock To
be
Issued
|
|
|
|
Subscriptions
Receivable
|
|
|
|
Accumulated
Deficit
|
|
|
|
controlling
interest
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE January
1, 2009
|
|
|
34,931,009
|
|
|
|
$
|
34,931
|
|
|
|
4,000,000
|
|
|
|
$
|
4,000
|
|
|
|
$
|
137,000
|
|
|
|
$
|
12,912,545
|
|
|
|
$
|
259,893
|
|
|
|
$
|
4,559,056
|
|
|
|
$
|
(2,062,670
|
)
|
|
|
$
|
(11,000,931
|
)
|
|
|
$
|
522,310
|
|
|
|
$
|
5,366,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of change in accounting principle-January 1,2009 reclassification
of conversion feature and warrants to derivative liability
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(1,414,068
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
124,699
|
|
|
|
|
-
|
|
|
|
|
(1,289,369
|
)
|
Balance
January 1, 2009, as adjusted
|
|
|
34,931,009
|
|
|
|
|
34,931
|
|
|
|
4,000,000
|
|
|
|
|
4,000
|
|
|
|
|
137,000
|
|
|
|
|
11,498,477
|
|
|
|
|
259,893
|
|
|
|
|
4,559,056
|
|
|
|
|
(2,062,670
|
)
|
|
|
|
(10,876,232
|
)
|
|
|
|
522,310
|
|
|
|
|
4,076,765
|
|
Sale
of 12,800 shares of common stock for cash to be issued
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
17,600
|
|
|
|
|
(40
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
17,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of preferred stock dividend
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
339,400
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(339,400
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of preferred stock dividend through issuance of common
shares
|
|
|
360,000
|
|
|
|
|
360
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(450,000
|
)
|
|
|
|
449,640
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of stock options and stock warrants granted to
employees
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
71,863
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
71,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of shares granted to employees
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
9,540
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
9,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for stock awards previously granted
|
|
|
90,000
|
|
|
|
|
90
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
59,310
|
|
|
|
|
-
|
|
|
|
|
(59,400
|
)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of shares
|
|
|
(10,000
|
)
|
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
10
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from previously issued stock
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1,852,385
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
1,852,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1,341
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
including noncontrolling interest
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(618,440
|
)
|
|
|
|
23,701
|
|
|
|
|
(594,739
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
September
30, 2009
|
|
|
35,371,009
|
|
|
|
$
|
35,371
|
|
|
|
4,000,000
|
|
|
|
$
|
4,000
|
|
|
|
$
|
26,400
|
|
|
|
$
|
12,079,300
|
|
|
|
$
|
261,234
|
|
|
|
$
|
4,526,796
|
|
|
|
$
|
(210,325
|
)
|
|
|
$
|
(11,834,072
|
)
|
|
|
$
|
546,011
|
|
|
|
$
|
5,434,715
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For Nine
Months Ended
September 30,
2009
|
|
|
For Nine
Months Ended
September 30,
2008
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
loss attributable to Bio-Bridge Science, Inc.
|
|
$
|
(618,440
|
)
|
|
$
|
(3,209,721
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
-
|
|
|
|
-
|
|
Depreciation
|
|
|
73,002
|
|
|
|
20,712
|
|
Amortization
of land use right
|
|
|
14,044
|
|
|
|
13,874
|
|
Fair
value of stock options and warrants granted to employees
|
|
|
71,863
|
|
|
|
2,458,112
|
|
Fair
value of common stock issued to employees
|
|
|
9,540
|
|
|
|
-
|
|
Unrealized
loss(gain) on trading securities
|
|
|
(40,965
|
)
|
|
|
117,013
|
|
Change
in fair value of derivative liability
|
|
|
(268,271
|
)
|
|
|
-
|
|
Gain
on sale of trading securities
|
|
|
-
|
|
|
|
(55,150
|
)
|
Gain
attributable to noncontrolling interest
|
|
|
23,701
|
|
|
|
2,834
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(32,140
|
)
|
|
|
(63,840
|
)
|
Inventories
|
|
|
(98,452
|
)
|
|
|
(43,699
|
)
|
Prepaid
expense and other assets
|
|
|
101
|
|
|
|
(10,809
|
)
|
Accounts
payable
|
|
|
(28,733
|
)
|
|
|
53,572
|
|
Accrued
expenses and other payables
|
|
|
(88,319
|
)
|
|
|
(26,235
|
)
|
Net
Cash Used In Operating Activities
|
|
|
(983,069
|
)
|
|
|
(743,337
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Increase
in construction in progress
|
|
|
(24,537
|
)
|
|
|
(435,364
|
)
|
Payable
to contractors for construction in progress
|
|
|
(141,288
|
)
|
|
|
-
|
|
Purchase
of fixed assets
|
|
|
(362,058
|
)
|
|
|
(2,323
|
)
|
Proceeds
from sale of trading securities
|
|
|
-
|
|
|
|
1,300,010
|
|
Purchase
of business, net of cash acquired
|
|
|
-
|
|
|
|
(393,940
|
)
|
Net
Cash Provided By (Used In) Investing Activities
|
|
|
(527,883
|
)
|
|
|
468,383
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
1,869,945
|
|
|
|
1,070,910
|
|
Advances
from director
|
|
|
(18,198
|
)
|
|
|
28,078
|
|
Net
Cash Provided By Financing Activities
|
|
|
1,851,747
|
|
|
|
1,098,988
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
340,795
|
|
|
|
824,034
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
1,342
|
|
|
|
(18,735
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
1,486,252
|
|
|
|
104,372
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
1,828,389
|
|
|
$
|
909,671
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
-
|
|
|
|
-
|
|
Interest
Paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
taxes Paid
|
|
$
|
49,425
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
NON-CASH FLOW INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Accrual
of preferred stock dividend
|
|
$
|
339,400
|
|
|
$
|
270,000
|
|
Payment
of preferred stock dividend
|
|
|
450,000
|
|
|
|
360,000
|
|
Cumulative
effect of change in accounting principle January 1, 2009 for
reclassification of conversion feature and warrants to derivative
liability
|
|
$
|
1,289,369
|
|
|
$
|
-
|
|
See
accompanying notes to the condensed consolidated financial
statements.
BIO-BRIDGE
SCIENCE, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
AS OF SEPTEMBER 30, 2009
NOTE
1 - BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements of Bio Bridge
Science Inc. and Subsidiaries (the "Company") have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and pursuant to the requirements for reporting
on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting
companies. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in United States of
America for complete financial statements. However, such information reflects
all adjustments (consisting solely of normal recurring adjustments), which are,
in the opinion of management, necessary for the fair presentation of the
consolidated financial position and the consolidated results of operations.
Results shown for interim periods are not necessarily indicative of the results
to be obtained for a full fiscal year.
The
condensed consolidated balance sheet information as of September 30, 2009 was
derived from the audited consolidated financial statements included in the
Company's Annual Report on Form 10-K filed with the SEC on March 31, 2009. These
interim financial statements should be read in conjunction with that
report.
NOTE
2 – ORGANIZATION AND PRINCIPAL ACTIVITIES
Bio-Bridge
Science, Inc. ("the Company") was incorporated in the State of Delaware on
October 26, 2004.
On
December 1, 2004, the Company acquired all of the outstanding shares of
Bio-Bridge Science Corporation ("BBSC"), a Cayman Islands corporation, in
exchange for 29,971,590 shares of its common stock, and as a result, BBSC became
a wholly owned subsidiary of the Company. The acquisition was accounted for
as a reverse merger (recapitalization) with BBSC deemed to be the
accounting acquirer, and the Company the legal acquirer. Accordingly, the
historical financial information presented in the condensed consolidated
financial statements are that of BBSC.
BBSC was
incorporated in the Cayman Islands on February 11, 2002. At the time of the
exchange, BBSC held a 100% interest in Bio-Bridge Science (Beijing) Corp. ("BBS
Beijing"), a wholly-foreign funded enterprise of the People's Republic of China
("PRC") which was established on May 20, 2002. BBS Beijing is currently
engaged in the development and commercialization of several vaccine candidates,
such as HIV-PV vaccine I, cervical cancer vaccine, colon cancer vaccine, in
mainland China.
On July
31, 2008, the Company acquired 51 percent of the outstanding capital interest of
Huhhot Xinheng Baide Biotechnology Co., Ltd. (“XHBD”, see Note
4). XHBD was
incorporated on May 17,
2006 under the laws of the PRC as a limited company, which is similar to a
limited liability company. XHBD is located in the city of Huhhot in
Inner Mongolia of the PRC. The primary operations of the XHBD are the
manufacture and distribution of bovine serum products, which is used in
research, production of pharmaceuticals, and production of veterinary
medicines. The results of XHBD are included in the accompanying
condensed consolidated financial statements from August 1, 2008. On July 1,
2009, XHBD received the approval to change its name to Bio-Bridge Xinheng Baide
Biotechnology Co., Ltd. (Bio-Bridge XHBD)
On June
9, 2009, Bio-Bridge Science (HK) Co., Ltd., a wholly-owned subsidiary of
Bio-Bridge Science, Inc. entered into an equity joint venture contract with JR
Scientific Inc., a California based manufacturer of classical and custom cell
culture medium and sera products and several other investors, to form a new cell
culture medium joint venture in Beijing, China. The registered
capital of the joint venture will be RMB 10,000,000 (approximately
US$ 1,464,000). The company will invest RMB 5,100,000 (approximately
US$732,000) in cash in the joint venture for 51% of the equity and JRS will
contribute certain technology for 15% of the equity. The balance of
the equity will be purchased by other investors. On October 16, 2009,
Bio-Bridge Science Inc. received a business license from the Beijing
Administration for Industry and Commerce of the PRC indicating approval of the
formation of Bio-Bridge JRS Biosciences (Beijing) Co., Ltd. (“Bio-Bridge JRS”).
Bio-Bridge JRS was officially established at the end of October
2009.
Going
Concern
The
Company has incurred accumulated losses of $11,834,072 from February 11,
2002 (Inception) through September 30, 2009. As a result, the
Company’s independent registered public accounting firm, in their report on the
Company’s 2008 consolidated financial statements, raised substantial doubt about
the Company’s ability to continue as a going concern.
Our
operations have been funded through issuances of our common stock and preferred
stock whereby we raised an aggregate $9,511,258 from February 11, 2002
(inception) through September 30, 2009. During the first quarter of
2009, the Company sold 12,800 shares of its common stock to a 123 investors at
$1.375 per share for a total consideration of $17,600. During 2008,
the Company sold 5,841,609 shares of its common stock to seven individuals for a
total of $4,244,999. Four of these individuals, who purchased
a total of 5,488,276 shares of common stock for a total of $3,980,000, are
members of our Board of Directors. Some of the sales agreements also
included warrants to purchase common stock.
Based on
our current operating plan, we believe that we have sufficient cash and cash
equivalents to last approximately through September 2010. We will need to obtain
additional financing in addition to the funds already raised through the sale of
equity securities to fund our cash needs and continue our operations beyond
September 2010. Additional financing, whether through public or private
equity or debt financing, arrangements with stockholders or other sources to
fund operations, may not be available, or if available, may be on terms
unacceptable to us. Our ability to maintain sufficient liquidity is dependent on
our ability to raise additional capital. If we issue additional equity
securities to raise funds, the ownership percentage of our existing
stockholders would be reduced. New investors may demand rights, preferences or
privileges senior to those of existing holders of our common stock. Debt
incurred by us would be senior to equity in the ability of debt holders to make
claims on our assets. The terms of any debt issued could impose restrictions on
our operations. If adequate funds are not available to satisfy either medium or
long-term capital requirements, our operations and liquidity could be materially
adversely affected and we could be forced to cut back our
operations.
NOTE
3 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of
Bio-Bridge Science Inc. and our wholly owned subsidiaries, Bio-Bridge Science
Corp., Bio-Bridge Science (Beijing) Corp, Bio-Bridge Science Holding Co. and Bio
Bridge Science (HK), Co. and our 51% owned subsidiary Huhhot Xinheng Baide
Biotechnology Co. Ltd (“XHBD”). Intercompany accounts and transactions have been
eliminated in consolidation.
Change in
accounting principle
On
January 1, 2009, the Company adopted authoritative guidance issued by the
Financial Accounting Standards Board (FASB) which affects the accounting for
warrants and many convertible instruments. As a result, certain
options and warrants and the conversion feature of the Company’s
convertible preferred stock previously treated as equity are no longer afforded
equity treatment because the strike price of the warrants is denominated in US
dollars, a currency other than the Company’s functional currency, the Chinese
Renminbi. As a result, these instruments are not considered indexed
to the Company’s own stock, and as such, all future changes in the fair value of
these instruments will be recognized currently in earnings until such time as
the options, warrants, or beneficial conversion feature are exercised or expire
(see Note 6).
On
January 1, 2009, the Company adopted authoritative guidance issued by the FASB
on noncontrolling interests in consolidated financial
statements. This guidance establishes accounting and reporting
standards for a noncontrolling (minority) interest in a subsidiary and for the
deconsolidation of a subsidiary. This statement clarifies that a noncontrolling
interest in a subsidiary is an ownership in the consolidated entity that should
be reported as equity in the consolidated financial statements. The adoption of
this did not have any material impact on the Company’s financial condition and
results of operations. However, it did impact the presentation and disclosure of
noncontrolling (minority) interests in the Company’s condensed consolidated
financial statements. The presentation and disclosure requirements were
retrospectively applied to the condensed consolidated financial
statements. As such, all prior periods presented have been conformed
to current year’s presentation. The noncontrolling (minority)
interest relates to third party shareholders of XHBD, who own 49% of XHBD as of
September 30, 2009.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Management makes these estimates using the best
information available and the best judgment at the time the estimates are made,
however actual results could differ materially from those
estimates.
Revenue
recognition
The
Company recognizes revenue from the sales of products when persuasive evidence
of an order arrangement exists, delivery has occurred, the sales price is fixed
or determinable and collectibility is reasonably assured. Generally,
these criteria are met at the time the product is shipped to customers when
title and risk of loss have transferred.
Impairment
of Long-Lived Assets
We
regularly evaluate our long-lived assets for indicators of possible impairment
whenever events or changes in business circumstances indicate that the carrying
amount of the assets may not be fully recoverable. An impairment loss would be
recognized when estimated undiscounted future cash flows expected to result from
the use of an asset and its eventual disposition are less than its carrying
amount. Impairment, if any, is measured using discounted cash
flows.
Goodwill
Goodwill
is related to the Company's acquisition of Huhhot Xinheng Baide Biotechnology
Co., Ltd on July 31, 2008 (see Note 4). Goodwill is not amortized,
rather, it is assessed for impairment at least annually. The Company
tests goodwill by using a two-step process. In the first step, the
fair value of the reporting unit is compared with the carrying amount of the
reporting unit, including goodwill. If the carrying amount of the
reporting unit exceeds its fair value, goodwill is considered impaired and a
second step is performed to measure the amount of impairment loss, if
any.
Financial
Assets and Liabilities Measured at Fair Value.
Effective
January 1, 2008, fair value measurements are determined by the Company's
adoption of authoritative guidance issued by the FASB, with the exception of the
application of the statement to non-recurring, non-financial assets and
liabilities as permitted. The adoption of the authoritative guidance did not
have a material impact on the Company's fair value measurements. Fair
value is defined in the authoritative guidance as the price that would be
received to sell an asset or paid to transfer a liability in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants at the measurement date. A fair value hierarchy was
established, which prioritizes the inputs used in measuring fair value into
three broad levels as follows:
Level 1—Quoted
prices in active markets for identical assets or liabilities.
Level 2—Inputs,
other than the quoted prices in active markets, are observable either directly
or indirectly.
Level 3—Unobservable
inputs based on the Company's assumptions.
The
Company is required to use of observable market data if such data is available
without undue cost and effort
The
following table presents certain investments and liabilities of the Company’s
financial assets measured and recorded at fair value on the Company’s condensed
consolidated balance sheets on a recurring basis and their level within the fair
value hierarchy as of September 30, 2009 (unaudited):
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Investment
in trading securities
|
|
$
|
156,599
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
156,599
|
|
Fair
value of options and warrants
|
|
|
|
|
|
|
|
|
|
|
553,158
|
|
|
|
553,158
|
|
Fair
value of conversion feature
|
|
|
-
|
|
|
|
-
|
|
|
|
467,940
|
|
|
|
467,940
|
|
|
|
$
|
1
56,599
|
|
|
$
|
-
|
|
|
$
|
1,021,098
|
|
|
$
|
1,177,697
|
|
Foreign
Currency Translation
The
accompanying consolidated financial statements are presented in United States
dollars. The functional currency of the Company is the Renminbi (RMB). Capital
accounts of the consolidated financial statements are translated into United
States dollars from RMB at their historical exchange rates when the capital
transactions occurred. Assets and liabilities are translated at the exchange
rates as of balance sheet date. Income and expenditures are translated at the
average exchange rate of the period.
|
|
As of and for
the
nine
months
ended
September
30,
2009
|
|
As of and for
the
nin
e
months
ended
September
30,
2008
|
|
|
|
|
|
Period
end RMB : US$ exchange rate
|
|
|
6.8290
|
|
6.8183
|
|
|
|
|
|
|
Average
period RMB : US$ exchange rate
|
|
|
6.8318
|
|
7.0615
|
The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into US
dollars at the rates used in translation.
Research
and Development
Research
and development costs are expensed as incurred. For the three and
nine months ended September 30, 2009 and 2008, research and development expenses
totaled $69,308 and $19,885, and $148,960 and $76,264,
respectively.
Comprehensive
Income
Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. The Company’s current
components of comprehensive income consist of foreign currency translation
adjustments:
|
|
Nine months ended September 30,
|
|
Three months ended September 30,
|
|
|
|
|
2009
|
|
|
|
2008
|
|
|
|
2009
|
|
|
|
2008
|
|
Net
loss
|
|
$
|
(618,440)
|
|
|
$
|
(3,209,721)
|
|
|
$
|
(1,312,674)
|
|
|
$
|
(2,721,687)
|
|
Foreign
currency translation adjustment
|
|
|
1,341
|
|
|
|
154,457
|
|
|
|
1,970
|
|
|
|
14,799
|
|
Comprehensive loss
|
|
$
|
(
617
,
099)
|
|
|
$
|
(3,05
5
,
264)
|
|
|
$
|
(1,3
10,704)
|
|
|
$
|
(
2
,
706
,
888)
|
|
Loss per
Share
Basic
earnings (loss) per share is computed by dividing income (loss) available to
common shareholders by the weighted average number of common shares outstanding
during the period. The diluted earnings per share calculation gives effect to
all potentially dilutive common shares outstanding during the period using the
treasury stock method. Common equivalent shares consist of shares
issuable upon the exercise of stock options or warrants. As of
September 30, 2009, common stock equivalents were composed of options
convertible into 3,380,000 shares of the Company's common stock and warrants
convertible into 8,864,943 shares of the Company's common
stock. For the three and nine month periods ended
September 30, 2009 and 2008, common equivalent shares have been excluded from
the calculation of loss per share as their effect is anti-dilutive.
Stock-Based
Compensation
The
Company periodically issues stock options and warrants to employees and
non-employees in capital raising transactions, for services and for financing
costs. Stock-based compensation is measured at the grant date, based on
the fair value of the award, and is recognized as expense over the requisite
service period. Options vest and expire according to terms established at
the grant date.
Concentrations
Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist principally of cash and unsecured trade accounts
receivable.
For the
three months ended September 30, 2009, two customers accounted for 100% of total
sales (81% and 19%, respectively). For the nine months ended
September 30, 2009, four customers accounted for 88% of total sales (39%, 20%,
19%, and 10%, respectively). At September 30, 2009, three
customers accounted for 83% of total accounts receivable (35%, 35%, and 13%,
respectively).
For the
three months ended September 30, 2008, two customers accounted for 87% of total
sales (51% and 36%, respectively). For the nine months ended September 30, 2008,
two customers accounted for 80% of total sales (47% and 33%,
respectively).
Recent
Accounting Pronouncements
In June
2009, the FASB issued authoritative guidance on accounting standards
codification and the hierarchy of generally accepted accounting principles
(“GAAP") effective for interim and annual reporting periods ending after
September 15, 2009. The FASB accounting standards codification (“ASC,
“Codification”) has become the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in accordance with GAAP. All existing
accounting standard documents are superseded by the Codification and any
accounting literature not included in the Codification will not be
authoritative. However, rules and interpretive releases of the SEC issued under
the authority of federal securities laws will continue to be sources of
authoritative GAAP for SEC registrants. Beginning with the
quarter ending September 30, 2009, all references made by the Company to GAAP in
its condensed consolidated financial statements use the Codification numbering
system. The Codification does not change or alter existing GAAP and, therefore,
it does not have an impact on our financial position, results of operations and
cash flows.
On July
1, 2009, the Company adopted authoritative guidance issued by the FASB on
business combinations. The guidance retains the fundamental requirements that
the acquisition method of accounting (previously referred to as the purchase
method of accounting) be used for all business combinations, but requires a
number of changes, including changes in the way assets and liabilities are
recognized and measured as a result of business combinations. It also requires
the capitalization of in-process research and development at fair value and
requires the expensing of acquisition-related costs as incurred. We
will apply this guidance to business combinations completed after July 1, 2009.
Adoption of the new guidance did not have a material impact on our
financial statements
On July
1, 2009, the Company adopted authoritative guidance issued by the FASB on
accounting and reporting for non-controlling interests. Non-controlling
interests are to be reported as a component of equity separate from the parent’s
equity, and purchases or sales of equity interests that do not result in a
change in control are to be accounted for as equity transactions. In addition,
net income attributable to a non-controlling interest is to be included in net
income and, upon a loss of control, the interest sold, as well as any interest
retained, is to be recorded at fair value with any gain or loss recognized in
net income. Adoption of the new guidance did not have a material impact on our
financial statements.
On
January 1, 2009, the Company adopted authoritative guidance issued by the FASB
which amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset. This pronouncement requires enhanced disclosures
concerning a company’s treatment of costs incurred to renew or extend the term
of a recognized intangible asset. Although this may impact our
reporting in future financial periods, we have determined that the standard did
not have any impact on our historical consolidated financial statements at the
time of adoption.
In
June 2009, the FASB made an update to consolidation of variable interest
entities. Among other things, the update replaces the calculation for
determining which entities, if any, have a controlling financial interest in a
variable interest entity (VIE) from a quantitative based risks and rewards
calculation, to a qualitative approach that focuses on identifying which
entities have the power to direct the activities that most significantly impact
the VIE’s economic performance and the obligation to absorb losses of the VIE or
the right to receive benefits from the VIE. The update also requires ongoing
assessments as to whether an entity is the primary beneficiary of a VIE
(previously, reconsideration was only required upon the occurrence of specific
events), modifies the presentation of consolidated VIE assets and liabilities,
and requires additional disclosures about a company’s involvement in VIEs. This
update will be effective for fiscal years beginning after November 15,
2009. The Company does not currently believe that the adoption of this update
will have any effect on its consolidated financial position and results of
operations.
In
October 2009, the FASB issued authoritative guidance on revenue recognition that
will become effective for us beginning July 1, 2010, with earlier adoption
permitted. Under the new guidance on arrangements that include software
elements, tangible products that have software components that are essential to
the functionality of the tangible product will no longer be within the scope of
the software revenue recognition guidance, and software-enabled products will
now be subject to other relevant revenue recognition guidance. Additionally, the
FASB issued authoritative guidance on revenue arrangements with multiple
deliverables that are outside the scope of the software revenue recognition
guidance. Under the new guidance, when vendor specific objective evidence or
third party evidence for deliverables in an arrangement cannot be determined, a
best estimate of the selling price is required to separate deliverables and
allocate arrangement consideration using the relative selling price method. The
new guidance includes new disclosure requirements on how the application of the
relative selling price method affects the timing and amount of revenue
recognition. We believe the adoption of this new guidance will
not have a material impact on our financial statements.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not or are not believed by
management to have a material impact on the Company's present or future
consolidated financial statements.
NOTE 4 - ACQUISITION OF HUHHOT
XINHENG BAIDE BIOTECHNOLOGY CO., LTD. (“
XHBD”
)
On July
31, 2008, the Company acquired 51 percent of the outstanding capital interest of
Huhhot Xinheng Baide Biotechnology Co., Ltd. (“XHBD”). XHBD is
located in the city of Huhhot in Inner Mongolia of the PRC and is organized
under the laws of the PRC. XHBD manufactures and distributes bovine
serum products, which is used in research, the production of
pharmaceuticals, and production of veterinary medicines. The Company
purchased 51 percent of the outstanding capital interest of XHBD in exchange for
cash of $881,058 (RMB 6,000,000). The acquisition was accounted for
as a purchase. As such, the results of XHBD's operations have been
included in the consolidated financial statements since August 1, 2008. The
components of the purchase price and the allocation of the purchase price are as
follows:
Purchase
Price
|
|
|
|
Cash
consideration
|
|
$
|
881,05
8
|
|
|
|
|
|
|
Purchase
price allocation
|
|
|
|
|
Fair
value of tangible assets acquired, including cash of
$487,118
|
|
$
|
1,114,828
|
|
Goodwill
|
|
|
243,248
|
|
Net
assets
|
|
|
1,358,076
|
|
Historical
cost of 49% minority interest
|
|
|
(477,018
|
)
|
Net
purchase price
|
|
$
|
881,058
|
|
Goodwill
represents the excess of the purchase price of XHBD over the fair value of the
identifiable assets acquired and liabilities assumed. The Company
accounts for minority interest using a historical basis.
The
following unaudited pro forma operating data shown below presents the results of
operations for the three and nine months ended September 30, 2008, as if the
acquisition of XHBD had occurred on the last day of the immediately preceding
fiscal period. Accordingly, transaction costs related to the acquisition
are not included in the loss from operations shown below. The pro forma results
are not necessarily indicative of the financial results that might have occurred
had the acquisition actually taken place on the respective dates, or of future
results of operations.
|
|
For the
three months
Ended
September 30,
|
|
|
For the
nine months
Ended
September 30,
|
|
|
|
200
8
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Net
sales
|
|
$
|
113,314
|
|
|
|
242,021
|
|
Net
Income (loss)
|
|
$
|
(2,732,1498
|
)
|
|
|
(3,256,486
|
)
|
|
|
|
|
|
|
|
|
|
Net
Income (loss) per share-basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.0
9
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding-basic and diluted
|
|
|
34,587,676
|
|
|
|
34,362,375
|
|
In
addition, China Diamond, an entity controlled by Mr. Trevor Roy, a director of
the Company, purchased 14 percent of XHBD on April 30, 2008. On
July 1, 2009, XHBD received the approval to change its name to Bio-Bridge
Xinheng Baide Biotechnology Co., Ltd. (Bio-Bridge XHBD)
NOTE
5 - INVENTORIES
Inventories
consist of the following at:
|
|
September
30,
2009
|
|
|
December 31,
2008
|
|
|
|
(
unaudited)
|
|
|
|
|
Raw
materials
|
|
$
|
192,241
|
|
|
|
40,929
|
|
Finished
goods
|
|
|
397,558
|
|
|
|
450,418
|
|
|
|
|
|
|
|
|
|
|
Total
inventories
|
|
$
|
589,799
|
|
|
|
491,347
|
|
NOTE
6 - DERIVATIVE LIABILITY
In June
2008, the FASB issued authoritative guidance on determining whether an
instrument (or embedded feature) is indexed to an entity’s own
stock. Under the authoritative guidance, effective January 1, 2009,
instruments which do not have fixed settlement provisions are deemed to be
derivative instruments. The strike price of options and warrants issued by
the Company, and the conversion feature in the Company’s preferred stock
are denominated in US dollars, a currency other than the Company’s functional
currency, RMB. As a result, the options and warrants
and conversion feature are not considered indexed to the Company’s own
stock. The fair value of certain of the Company’s options and
warrants, and the conversion feature of the Company’s convertible preferred
stock, have been re-characterized as derivative liabilities effective January 1,
2009. The FASB’s guidance requires the fair value of these
liabilities be re-measured at the end of every reporting period with the change
in value reported in the statement of operations.
At
January 1, 2009, the Company had 2,297,000 options and 8,864,943 warrants
outstanding with a strike price denominated in US dollars, a currency other than
the Company’s functional currency, RMB. The Company determined that
2,177,000 of the options and 5,488,276 of the warrants were issued pursuant to
share-based payments and therefore were not subject to the liability
accounting.
The
derivative liabilities were valued using the Black-Scholes-Merton valuation
technique with the following assumptions:
|
|
September
30
2009
|
|
|
December 31,
2008
|
|
|
At dates of issuance
in 2007 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
2.32
|
%
|
|
|
1.55
|
%
|
|
2.%
to 3.4
|
%
|
Expected
volatility
|
|
|
179.0
|
%
|
|
|
80.3
|
%
|
|
50%
to 56
|
%
|
Expected
life (in years)
|
|
1
to 3 years
|
|
|
1
to 3 years
|
|
|
2
to 5 years
|
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
and warrants
|
|
$
|
553,159
|
|
|
$
|
558,193
|
|
|
$
|
124,699
|
|
Conversion
feature
|
|
|
467,939
|
|
|
|
731,176
|
|
|
|
1,293,320
|
|
|
|
$
|
1,021,098
|
|
|
$
|
1,289,369
|
|
|
$
|
1,418,019
|
|
The
risk-free interest rate is based on the yield available on U.S. Treasury
securities. The Company estimates volatility based on the historical
volatility of its common stock. The expected life of the options and
warrants and conversion feature are based on the expiration date of the
related options and warrants and convertible preferred stock. The
expected dividend yield was based on the fact that the Company has not paid
dividends to common shareholders in the past and does not expect to pay
dividends to common shareholders in the future.
Accounting
for the derivatives was implemented in the first quarter of 2009 and is reported
as a cumulative change in accounting principles. The cumulative
effect on the accounting for the conversion feature of the notes and the
warrants at December 31, 2008 is as follows:
Derivative Instrument:
|
|
Additional Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Derivative
Liability
|
|
Options
and warrants
|
|
$
|
682,892
|
|
|
$
|
(124,699
|
)
|
|
$
|
558,193
|
|
Conversion
feature
|
|
|
731,176
|
|
|
|
-
|
|
|
|
731,176
|
|
|
|
$
|
1,414,068
|
|
|
$
|
(1
24,699
|
)
|
|
$
|
1,289,369
|
|
The
warrants were originally recorded at their relative fair value as an increase in
additional paid-in capital. The change in the accumulated deficit
includes gains resulting from decreases in the fair value of the derivative
liabilities through December 31, 2008. The derivative liability
amounts reflect the fair value of each derivative instrument as of the January
1, 2009, date of implementation.
The
Company measured the fair value of the options, warrants, and conversion feature
as of September 30, 2009 as $1,021,098. For the three and nine months
ended September 30, 2009, the Company recorded a gain (loss) on the change in
the fair value of derivatives of $(958,147) and $268,271,
respectively.
NOTE 7
- SHAREHOLDER'S EQUITY
Preferred
Stock
On
December 31, 2006, the Company amended its certificate of incorporation to
provide for 5,000,000 shares of Series A preferred stock. Pursuant to the
Company's certificate of incorporation, its board of directors has the
authority, without further action by the stockholders, to issue up to 5,000,000
shares of undesignated preferred stock, par value $0.001 per share. The
Company's board will also have the authority, without the approval of the
stockholders, to fix the designations, powers, preferences, privileges and
relative, participating, optional or special rights and the qualifications,
limitations or restrictions of any preferred stock issued, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation
preferences, any or all of which may be greater than the rights of the common
stock. Preferred stock could thus be issued with terms that could delay
or prevent a change in control of our company or make removal of management
more difficult.
On
January 30, 2007, the Company entered into a Securities Purchase Agreement with
three investors, whereby the Company agreed to sell 4,000,000 shares of Series A
Convertible Preferred Stock and warrants to purchase 3,000,000 shares of common
stock at $1.00 per share. On February 12, 2007, the preferred stock and warrants
were issued for $0.75 per unit, or $3,000,000 in aggregate.
The
preferred stock earns dividends at 12% annually, in common shares of the Company
valued at $1.00 per share, payable semiannually in arrears. The preferred stock
dividend is cumulative and non-participating. During the nine months
ended September 30, 2009 and 2008, the Company recorded $339,400 and $270,000 of
preferred stock dividends payable. The preferred stock has
liquidation preference of $0.75 per share and no voting rights. The preferred
shares contain standard anti-dilution protection.
At the
holder’s option, the preferred stock is convertible into the Company’s common
stock on a one-for-one basis anytime up to January 30, 2010 (three
years). At the Company’s option, the preferred stock is convertible
into the Company’s common stock (at the conversion price initially set at $0.75
per share) when the average closing price of the common stock for any 20
consecutive trading days is at least $2.00. On the third anniversary (January
30, 2010) of the closing, the Company shall have the right to convert all the
Preferred Stock then outstanding into shares of common
stock. The warrants are exercisable through January 20, 2010,
into 3,000,000 shares of the Company’s common stock for $1.00 per
share.
Common
Stock
In the
first quarter of 2009, the Company sold 12,800 shares of common stock to 123
investors at $1.375 per share for a total consideration of $17,600.
On July
20, 2009, the Company issued 38,160 shares of common stock to two employees. The
shares were valued at $9,540 based on the OTCBB closing bid price of the shares
on the date the shares were granted and was recorded as compensation
expense.
NOTE 8
- STOCK OPTION AND WARRANTS
Options
On July
20, 2009, the Company granted 1,083,000 options to purchase shares of common
stock to employees, expiring 10 years from the date granted, and exercisable at
$0.001 to $0.52 per share. Options to purchase 3,000 shares of common
stock are exercisable at $0.001 per share, options to purchase 840,000 shares of
common stock are exercisable at $0.47 per share, and options to purchase 240,000
shares of common stock are exercisable at $0.52 per share. 283,000 of
the options vested immediately and 800,000 of the options will vest ratably over
21 months. The options were valued at $258,791, the fair value of the
stock options on the date granted determined using a Black-Scholes pricing
model. The Company recognized $71,863 of compensation expense from the date the
options were granted through September 30, 2009 for the fair value of the vested
options. Amortization of the unvested options will be as follows:
$26,703 for the three months ended December 31, 2009, $106,812 for the year
ended December 31, 2010, and $53,413 for the year ended December 31,
2011.
The fair
value of the options granted on July 20, 2009 were determined using a
Black-Scholes option pricing model with the following assumptions: 2.32% average
risk-free interest rate; 179% expected volatility; six year expected term, and
0% dividend yield.
At
September 30, 2009, options to purchase shares of the Company’s common stock
outstanding were as follows:
|
|
Options
Granted
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2009
|
|
|
2,297,000
|
|
|
$
|
0.42
|
|
Granted
|
|
|
1,083,000
|
|
|
|
0.48
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
Withdrawn
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2009
|
|
|
3,380,000
|
|
|
$
|
0.4
4
|
|
The
following table summarizes information about stock options outstanding as of
September 30, 2009:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise
Prices
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual
Life (in years)
|
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
$0.001 to $0.55
|
|
|
3,380,000
|
|
|
$
|
0.44
|
|
|
|
7.27
|
|
|
|
2,680,000
|
|
|
$
|
0.44
|
|
|
|
|
3,380,00
0
|
|
|
|
|
|
|
|
|
|
|
|
2,680,000
|
|
|
|
|
|
Information
relating to stock options at September 30, 2009 summarized by exercise price is
as follows:
|
Outstanding
|
|
|
Exercisable
|
|
Exercise price per
Share
|
|
Number of
shares
|
|
|
Remaining
Life (years)
|
|
|
Exercise
price
|
|
|
Number of
Shares
|
|
|
Weighted
average
ex
ercise price
|
|
$
|
0.001
|
|
|
400,000
|
|
|
|
6.33
|
|
|
$
|
0.001
|
|
|
|
400,000
|
|
|
$
|
0.0001
|
|
$
|
0.001
|
|
|
20,000
|
|
|
|
2.75
|
|
|
$
|
0.001
|
|
|
|
20,000
|
|
|
$
|
0.0001
|
|
$
|
0.001
|
|
|
3,000
|
|
|
|
9.80
|
|
|
$
|
0.001
|
|
|
|
3,000
|
|
|
$
|
0.0001
|
|
$
|
0.47
|
|
|
840,000
|
|
|
|
9.80
|
|
|
$
|
0.47
|
|
|
|
315,000
|
|
|
$
|
0.47
|
|
$
|
0.50
|
|
|
1,277,000
|
|
|
|
6.25
|
|
|
$
|
0.50
|
|
|
|
1,277,000
|
|
|
$
|
0.50
|
|
$
|
0.52
|
|
|
240,000
|
|
|
|
9.80
|
|
|
$
|
0.52
|
|
|
|
65,000
|
|
|
$
|
0.52
|
|
$
|
0.55
|
|
|
600,000
|
|
|
|
6.25
|
|
|
$
|
0.55
|
|
|
|
600,000
|
|
|
$
|
0.55
|
|
$
|
0.001
to $0.55
|
|
|
3,380,000
0
|
|
|
|
7.27
|
|
|
$
|
0.44
|
|
|
|
2,
680
,000
|
|
|
$
|
0.44
|
|
Warrants
At
September 30, 2009, warrants to purchase shares of the Company’s common stock
outstanding were as follows:
|
|
Number of
Shares under
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
Warrants
outstanding at January 1, 2009
|
|
|
8,864,943
|
|
|
|
0.95
|
|
Warrants
granted
|
|
|
-
|
|
|
|
|
|
Warrants
expired
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding at September 30, 2009
|
|
|
8,864,943
|
|
|
$
|
0.95
|
|
The
following table summarizes information about warrants outstanding at September
30, 2009:
Warrants Outstanding and Exercisable
|
|
|
|
|
|
|
|
|
|
Number of Shares Under Warrants
|
|
Exercise Price
|
|
Expiration Date
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
50,000
|
|
$
|
1.20
|
|
November
20, 2009
|
|
$
|
1.20
|
|
3,000,000
|
|
$
|
1.00
|
|
January
20, 2010
|
|
$
|
1.00
|
|
183,334
|
|
$
|
0.75
|
|
June
4, 2011
|
|
$
|
0.75
|
|
183,333
|
|
$
|
1.20
|
|
June
4, 2013
|
|
$
|
1.20
|
|
1,724,138
|
|
$
|
0.725
|
|
July
2, 2012
|
|
$
|
0.725
|
|
1,724,138
|
|
$
|
1.10
|
|
July
2, 2013
|
|
$
|
1.10
|
|
1,000,000
|
|
$
|
0.725
|
|
July
9, 2012
|
|
$
|
0.725
|
|
1,000,000
|
|
$
|
1.10
|
|
July
9, 2013
|
|
$
|
1.10
|
|
8,864,943
|
|
$
|
0.75-$1.20
|
|
|
|
$
|
0.95
|
|
The
aggregate intrinsic value of 3,380,000 options and 8,864,943 warrants
outstanding as of September 30, 2009 was $370,377. The aggregate intrinsic value
of 2,680,000 options and 8,864,943 warrants exercisable as of September 30, 2009
was $271,876. The aggregate intrinsic value for the options and
warrants is calculated as the difference between the price of the underlying
awards and quoted price of the Company’s common shares for the awards that were
in-the-money as of September 30, 2009.
NOTE 9
- COMMITMENTS AND CONTINGENCIES
Construction
in Progress
In May
2003, the Company acquired a land use right for approximately 28 acres of land
in the Tianzhu Export Processing Zone, Shunyi District, Beijing, China, which
the Company plans to develop into a laboratory and bio-manufacturing facility in
compliance with Good Manufacturing Practices, or GMP, regulations primarily for
clinical trials of our vaccine candidates. The general plans for development
include the construction of a laboratory facility (“Phase One”) and construction
of an administrative office building (“Phase Two”). At September 30, 2009,
the Phase One construction and internal clean room await the inspections and
approval from the government, which is expected to be finished by the end of
2009, and is recorded as construction in progress. At September 30, 2009,
$44,641 is recorded as due to the contractors of Phase One for the completed
construction and internal clean room decoration. The Company expects that the
Phase One will be fully in operations before year-end of 2009.
At
September 30, 2009, Phase Two was still in the design stage. The Company
estimates the total project costs for Phase Two will be approximately
$1,200,000.
The
Company estimates that construction may begin on Phase Two in 2011 or later, but
currently has no plans for Phase Two construction.
Lease
Commitment
As of
September 30, 2009, the company had future minimum lease payments of $7,126 and
$19,004 due in 2009 and 2010, respectively, related to the operating lease for
its office in Oak Brook, IL.
Royalty
and License Arrangements
Liang
Qiao, M.D., our co-founder and chief executive officer, is one of the two
co-inventors of our core technology that was assigned to Loyola University
Chicago in April 2001. Under an agreement with Loyola University Chicago, we
have obtained exclusive rights to this technology for use in its future products
within the United States, Japan and the People's Republic of China, including
mainland China, Hong Kong, Taiwan and Macau. The license continues perpetually
or for the maximum period of time permitted by law, unless terminated earlier
under the terms of the agreement. Pursuant to this agreement, Loyola receives a
royalty of 4% from the net profit for all uses of the licensed technology,
including uses under sublicenses. As of September 30, 2009, we had not generated
any revenues from the sale of any products under development, nor had we
received any revenues from sublicenses.
Joint
Venture
On June
9, 2009, Bio-Bridge Science (HK) Co., Ltd., a wholly-owned subsidiary of
Bio-Bridge Science, Inc. entered into an equity joint venture contract with JR
Scientific Inc., a California based manufacturer of classical and custom cell
culture medium and sera products and several other investors, to form a new cell
culture medium joint venture in Beijing, China. The registered
capital of the joint venture will be RMB 10,000,000 (approximately
US$ 1,464,000). The company will invest RMB 5,100,000 (approximately
US$732,000) in cash in the joint venture for 51% of the equity and JRS will
contribute certain technology for 15% of the equity. The balance of
the equity will be purchased by other investors. On October 16, 2009,
Bio-Bridge Science Inc. received a business license from the Beijing
Administration for Industry and Commerce of the PRC indicating approval of the
formation of Bio-Bridge JRS Biosciences (Beijing) Co., Ltd. (“Bio-Bridge
JRS”). Bio-Bridge JRS was established at the end of October
2009.
NOTE
10 - SUBSEQUENT EVENTS
The
Company has evaluated subsequent events occurring between the end of our fiscal
quarter on September 30, 2009 and November 10, 2009, which is the date the
accompanying financial statements were issued. There are no significant
subsequent events.
Item 2. Management's Discussion and
Ana
lysis of Financial
Condition and Results of Operation
Some of
the statements made by us in this Quarterly Report on Form 10-Q are
forward-looking in nature, including but not limited to, statements relating to
our future revenue and expenses, product development, future market acceptance,
levels of research and development, our management's plans and objectives for
our current and future operations, and other statements that are not historical
facts. Forward-looking statements include, but are not limited to, statements
that are not historical facts, and statements including forms of the words
"intend", "believe", "will", "may", "could", "expect", "anticipate", "plan",
"possible", and similar terms. Actual results could differ materially from the
results implied by the forward looking statements due to a variety of factors,
many of which are discussed throughout this Quarterly Report and in our SEC
filings. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We
undertake no obligation to publicly release any revisions to these
forward-looking statements that may reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events, unless
required by law. Factors that could cause actual results to differ
materially from those expressed in any forward-looking statement made by us
include, but are not limited to:
·
|
our
ability to finance our activities and maintain our financial
liquidity;
|
·
|
our
ability to attract and retain qualified, knowledgeable
employees;
|
·
|
our
ability to complete product
development;
|
·
|
our
ability to obtain regulatory approvals to conduct clinical
trials;
|
·
|
our
ability to design and market new products
successfully;
|
·
|
our
ability to acquire new customers in the
future;
|
·
|
deterioration
of business and economic conditions in our markets;
and
|
·
|
intensely
competitive industry conditions.
|
In this
document, the words "we," "our," "ours," and "us" refers to Bio-Bridge Science,
Inc. and our wholly owned subsidiaries, including Bio-Bridge Science (Beijing)
Co. Ltd., a Wholly-Foreign Owned Enterprise of the People's Republic of China
("Bio-Bridge (Beijing)") , Bio-Bridge Science Corporation, a Cayman Islands
corporation, Bio-Bridge Science Holding Co. Ltd, a Cayman Islands corporation,
Bio-Bridge Science(HK) CO. Ltd, a Hong Kong company, and Xinheng Baide
Biotechnology Co. Ltd., a Chinese company.
OVERVIEW
Bio-Bridge
Science, Inc. is a biotechnology company whose subsidiaries are focused on the
commercial development of HIV vaccine (HIV-PV Vaccine I), HPV vaccine (cervical
cancer vaccine), colon cancer vaccine, and mucosal adjuvant as well as vaccine
production materials such as serum and cell culture media. We have been
developing our vaccines through our subsidiary Bio-Bridge Science,
Beijing. The pre-clinical testing of our HIV vaccine (HIV-PV Vaccine
I) on laboratory animals in Beijing, China was completed in June 2006. As of
December 31, 2005, we had completed the construction of the outside body of our
laboratory and bio-manufacturing facility in Beijing, China. The internal clean
room installation project has been substantially completed and equipment for
vaccine production has been purchased. We expect to pass the local government
inspection and receive the necessary licenses for the facility before the end of
2009, and by then the laboratory facility will be fully in operations. Once the
HIV vaccine is produced in sufficient amount (expected early 2010), we will
submit application to China’s State Food and Drug Administration for approval to
conduct clinical trial. We acquired a 51% equity interest in
Huhhot Xinheng Baide Biotechnology Co. Ltd. at the end of July 2008 and it is
renamed as Bio-Bridge XHBD. Bio-Bridge XHBD produces and sells bovine serum, a
major material used in the production of vaccines. In October, we
formed a joint venture (Bio-Bridge JRS Biosciences) with JR Scientific Inc. and
other investors to produce and sell cell culture media. Both serum and cell
culture media are vaccine production materials. We expect Bio-Bridge XHBD
and Bio-Bridge JRS Biosciences will bring us revenues.
Plan of
Operations
Vaccine
Development
Our
primary corporate focus is on the commercial development of our potential
vaccine products through our subsidiaries. Our capital requirements,
particularly as they relate to product research and development, have been and
will continue to be significant. Our future cash requirements and the adequacy
of available funds will depend on many factors, including the pace at which we
are able to obtain regulatory approvals of vaccine candidates, whether or not a
market develops for our products and, if a market develops, the pace at
which it develops, and the pace at which the technology involved in making our
products changes.
The
pre-clinical testing of HIV-PV Vaccine I on laboratory animals was completed in
Beijing Institute of Radiation Medicine and the testing result was issued in
June 2006 and showed encouraging results. The clinical trial for therapeutic
vaccine is expected to last three years. The clinical trial for preventive
vaccine will last longer, most likely five to seven years. We have purchased and
installed the laboratory equipment in our laboratory facility based in Tianzhu,
Beijing and all the preparatory works for HIV-PV Vaccine I production are in
progress. We expect that we will submit the application for clinical trials to
the Chinese SFDA in mid- 2010 after we are able to produce our vaccine samples
and all the necessary documents are well-prepared.
We also
plan to conduct the pre-clinical trials for colon cancer vaccine and HPV
vaccine. We estimate that we will complete the pre-clinical trial of colon
cancer vaccine by mid 2010 and that of HPV vaccine by late 2010. We expect to
enter clinical trials of colon cancer vaccine in the first half of 2011. As we
discussed previously, clinical trial for therapeutic vaccine is expected to last
three years. All the technology to make HIV vaccine and colon
cancer vaccine is based on the technology co-developed by our CEO, Dr.
Liang Qiao. Because we use the same technology to develop our potential vaccine
products, we expect to use the same GMP facility in Beijing, China, to produce
the HIV vaccine and colon cancer vaccine for pre-clinical and clinical
trials.
To date
we have funded our operations from funds we raised in private offerings. In the
first quarter of 2009, the Company sold 12,800 shares of common stock to a
hundred twenty-three investors at $1.375 per share for a total consideration of
$17,600.
During
2008, we sold common stock and investment unit composed of common stock and
warrants to investors in several private placements in which we raised
$4,245,000 in total. During the next twelve months, we will need to raise
capital through an offering of our securities or from loans to continue research
and development of our various vaccine product candidates in China as well as
conducting the potential acquisition activities in China. We estimate that our
capital requirements for the next twelve months as follows:
o
approximately $1.0 million for preparatory work and Phase I clinical study of
HIV-PV Vaccine I;
o
approximately $1.0 million for working capital and general corporate needs;
and
o
approximately $0.7 million for pre-clinical trials on colon cancer vaccine and
HPV vaccine.
We expect
that the therapeutic vaccine can be brought to market in three years and the
preventive vaccine can be brought to market in five to seven years, if we are
successful in raising funds to complete development of the vaccines. As of
September 30 2009, our cash and cash equivalents and trading securities position
was $1,984,988. Although we raised $4.245 million in 2008 in private placements,
we still need to raise additional funds through the public or private sales of
our securities, loans, or a combination of the foregoing to finance our planned
operations. We cannot guarantee that financing will be available to us, on
acceptable terms or at all. We also may borrow from local banks in China given
that our land use right and laboratory facility could be used as collateral for
borrowing. If we fail to obtain other financing in the next 12 months, either
through an offering of our securities or by obtaining additional loans, we may
be unable to develop our planned projects as scheduled and may be forced to
scale back.
Distribution
of Xinhua surgical instruments
We signed
an exclusive agency agreement with Xinhua Surgical Instruments Co. Ltd. to
distribute its operational instruments in the United States at the end of 2005.
We are currently seeking collaboration with local distributors and developing
markets for Xinhua instruments. We built up a B2C website devoted to selling
Xinhua surgical instruments in 2008. Also, we initiated some marketing
campaigns, such as buying Google keywords. As a result of our efforts, our
surgical instrument sale has shown dramatic sales growth. However, the revenues
from this business are not significant to us.
Acquisitions
of companies complementary to the Company
The
Company is also seeking opportunities to acquire other profitable vaccine
companies or vaccine production related companies, such as those producing
materials for vaccine production, in China. Such an acquisition may help support
our development of our in-house vaccines candidates by providing us with
operating cash flows, lower cost for material used in our vaccine production,
skillful work force in vaccine production, and a distribution channel. We
believe these companies will be complementary to us and make us more
competitive.
To that
end, the Company completed the acquisition of Huhhot Xinheng Baide Biotechnology
Co. Ltd., (“XHBD”) on July 31, 2008, in which the Company purchased 51% of the
outstanding capital interests of XHBD for RMB 6 million (approximately US$
881,000). XHBD was incorporated on May 17, 2006 under the laws
of the People’s Republic of China (“PRC”) as a limited company. XHBD is
located in the city of Huhhot in Inner Mongolia, China. The primary operations
of the Company are the manufacture and distribution of bovine serum products,
which is used in research, and production of vaccines. The acquisition was
accounted for as a purchase. The assets acquired and liabilities
assumed were recorded at their fair values at the date of acquisition. We
completed the 51% acquisition of Xinheng Baide on July 31, 2008 and its
operations are included in our consolidated financial statements beginning
August 1, 2008. On July 1, 2009, XHBD received the approval to change its name
to Bio-Bridge Xinheng Baide Biotechnology Co., Ltd. (Bio-Bridge
XHBD).
A new Joint Ve
nture
On June
9, 2009, Bio-Bridge Science (HK) Co., Ltd., a wholly-owned subsidiary of
Bio-Bridge Science, Inc. entered into an equity joint venture contract with JR
Scientific Inc., a California based manufacturer of classical and custom cell
culture medium and sera products (“JRS”) and several other investors, to form a
new cell culture medium joint venture in Beijing, China. The
registered capital of the joint venture will be RMB 10,000,000
(approximately US$ 1,464,000). We will invest RMB 5,100,000 (approximately
US$732,000) in cash in the joint venture for 51% of the equity and JRS will
contribute certain technology for 15% of the equity. The balance of
the equity will be purchased by other investors. On October 16, 2009,
Bio-Bridge Science Inc. received a business license from the Beijing
Administration for Industry and Commerce of the PRC indicating approval of the
formation of Bio-Bridge JRS Biosciences (Beijing) Co., Ltd. (“Bio-Bridge
JRS”). Bio-Bridge JRS is expected to produce and sell cell culture
media in 2010.
Results
of Operations
Three-month
period ended September 30, 2009 and September 30, 2008
During
the three-month period ended September 30, 2009, we had revenue of $142,901. The
cost of revenue was $92,052, which was 64% of the total revenue. Of
the total revenue, we generated revenue of $19,405 from selling Xinhua surgical
instruments and the cost of goods sold was $9,541, which was 49%.
During
the three-month period quarter ended September 30, 2008, we had revenues of
$113,314. The cost of revenue was $89,348, which was 79% of the total revenue.
On July 31, 2008, the Company finished the acquisition of Huhhot Xinheng Baide
Biotechnology Co. Ltd., (“XHBD”). Included in consolidate revenues and cost of
revenue for the three-month period ended September 30, 2008 are XHBD’s revenue
and cost of revenue from August 1, 2008 to September 30, 2008 which totaled
$107,181 and $84,303, respectively.
Also,
we generate revenue of $6,133 from selling Xinhua surgical instruments for the
three-month period ended September 30, 2008, and the cost of revenue was $2,740,
which was 45%.
For the
quarter ended September 30, 2009, research and development expenses were
$69,308, as compared to $19,885 for the quarter ended September 30, 2008. The
significant increase of $49,423 is due to the expense of the pre-clinical trial
development of our vaccine candidates.
For the
quarter ended September 30, 2009, general and administrative expenses were
$308,704 as compared to $2,658,966 for the quarter ended September 30, 2008. The
decrease of $2,350,262 was due to $2,243,241 of compensation costs for
investments from directors recorded in 2008, which did not occur in
2009.
For the
quarter ended September 30, 2009, selling and distribution expenses were $57,619
as compared to $22,499 for the quarter ended September 30, 2008. The increase of
$35,120 is due primarily to increases in shipping and selling expense related to
XHBD.
For the
quarter ended September 30, 2009, interest expense was $340 as compared to
interest expense of $798 for the quarter ended September 30, 2008. The decrease
of $458 is not material.
However,
none of these revenues pertain to our core planned principal operations of
developing vaccine candidates. Therefore, we believe a separate analysis of
these revenues is not as helpful as an analysis of our liquidity and capital
resources.
Net loss
attributable to common shareholders for the quarter ended September 30, 2009 was
$1,407,324 as compared to net loss attributable to common shareholders of
$2,811,687 for the quarter ended September 30, 2008. This decrease of
$1,404,363 in net loss is attributable primarily to compensation costs for
investments from directors recorded in the third quarter of 2008 and offset by
the increase in change of fair value of derivative liability in the third
quarter of 2009.
Nine-month
period ended September 30, 2009 and September 30, 2008
During
the nine-month period ended September 30, 2009, we had revenue of $582,925.
The cost of revenue was $376,780, which was 65% of the total
revenue. On July 31, 2008, the Company finished the acquisition of
Huhhot Xinheng Baide Biotechnology Co. Ltd., (“XHBD”). Of the total revenue, we
generated revenue of $54,512 from selling Xinhua surgical instruments and the
cost of goods sold was $23,354, which was 43%.
During
the nine months ended September 30, 2008, we had revenues of $120,741. The cost
of revenue was $92,196, which was 76% of the total revenue. On July 31, 2008,
the Company finished the acquisition of Huhhot Xinheng Baide Biotechnology Co.
Ltd., (“XHBD”). Included in consolidate revenues and cost of revenue for the
nine-month period ended September 30, 2008 are XHBD’s revenue and cost of
revenue from August 1, 2008 to September 30, 2008 which totaled $107,181 and
$84,303, respectively. Also, we generate revenue of $13,560 from selling Xinhua
surgical instruments for the nine-month period ended September 30, 2008, and the
cost of revenue was $5,588, which was 41%.
For the
nine-month period ended September 30, 2009, research and development expenses
were $148,960, as compared to $76,264 for the nine-month period ended September
30, 2008. The increase of $72,696 is due to the increase of the pre-clinical
trial development of our vaccine candidates.
For the
nine-month period ended September 30, 2009, general and administrative expenses
were $808,109 as compared to $3,103,364 for the nine-month period ended
September 30, 2008. The decrease of $2,295,255 is mainly related to $2,243,241
of compensation costs for investments from directors recorded in the third
quarter of 2008 and offset by the decrease in the fair value of derivative
liability of $268,271 in the third quarter of 2009.
For the
nine-month period ended September 30, 2009, selling and distribution expenses
were $148,581 as compared to $56,109 for the nine-month period ended September
30, 2008. The increase of $92,472 is due primarily to increases in shipping and
selling expense and selling and distribution of XHBD, which we owned for all
nine months of 2009 as compared to five months of 2008
For the
nine-month period ended September 30, 2009, interest expense was $637 as
compared to interest expense of $2,443 for the nine-month period ended September
30, 2008. The decrease of $1,806 is due primarily to a decrease in interest
and borrowing.
Net
income attributable to common shareholders for the nine-month period ended
September 30, 2009 was $957,840 as compared to net loss attributable to common
shareholders of $3,479,721 for the nine months ended September 30, 2008. This
decrease of $2,521,881 in net income is attributable primarily to compensation
costs for investments from directors recorded in the third quarter of 2008 and
offset by the increase in change of fair value of derivative
liability.
Liquidity
and Capital Resources
Our
principal sources of liquidity are cash and cash equivalent balances, which were
$1,828,389 at September 30, 2009 and $1,486,252 at December 31, 2008. Also, we
had marketable securities valued at $156,599 as of September 30, 2009.
These marketable securities were classified as trading
securities.
Net cash
used in operating activities was $983,069 for the nine months ended September
30, 2009 and $743,337 for the nine months ended September 30, 2008. The increase
was due primarily to an increase in operational activities in our vaccine
operations and our acquisition of XHBD at July 31, 2008.
Net cash
provided by (used in) investing activities was ($527,883) for the nine months
ended September 30, 2009 and $468,383 for the nine months ended September
30, 2008. This change was due to the sale of our trading securities during the
nine months ended September 30, 2008 and also the purchase of fixed assets for
the nine months ended September 30, 2009.
Net cash
provided by financing activities was $1,851,747 for the nine months ended
September 30, 2009 compared to $1,098,988 for the nine months ended September
30, 2008. This increase was mainly due to proceeds from the issuance of commons
stock during the nine months ended September 30, 2009.
To date,
our operations have been funded through issuances of our common stock and
preferred stock whereby we raised an aggregate $8,649,438 from inception through
September 30, 2009.
In the
first quarter of 2009, the Company sold 12,800 shares of common stock to a
hundred twenty-three investors at $1.375 per share for a total consideration of
$17,600.
During
2008, the Company sold 5,841,609 shares of its common stock to seven individuals
for a total of $4,245,000. Four of these individuals, who purchased a
total of 5,488,276 shares of common stock for a total of $3,980,000, are members
of our Board of Directors. Some of the sales agreements also included
warrants to purchase common stock.
During
2007, the Company sold 4,000,000 shares of Series A Convertible Preferred Stock
and warrants to purchase 3,000,000 shares of common stock at $1.00 per share to
three individuals for a total of $3,000,000.
The
Company has incurred accumulated losses of $11,834,072 from February 11,
2002 (Inception) through September 30, 2009. As a result, the
Company’s independent registered public accounting firm, in their report on the
Company’s 2008 consolidated financial statements, raised substantial doubt about
the Company’s ability to continue as a going concern.
Based on
our current operating plan, we believe that we have sufficient cash and cash
equivalents to last approximately through September 2010. We will need to obtain
additional financing in addition to the funds already raised through the sale of
equity securities to fund our cash needs and continue our operations beyond
September 2010. Additional financing, whether through public or private equity
or debt financing, arrangements with stockholders or other sources to fund
operations, may not be available, or if available, may be on terms unacceptable
to us. Our ability to maintain sufficient liquidity is dependent on our ability
to raise additional capital. If we issue additional equity securities to raise
funds, the ownership percentage of our existing stockholders would be reduced.
New investors may demand rights, preferences or privileges senior to those of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either medium or long-term capital requirements,
our operations and liquidity could be materially adversely affected and we could
be forced to cut back our operations.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the U.S. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses for each period. The following represents a summary of our critical
accounting policies, defined as those policies that we believe are the most
important to the portrayal of our financial condition and results of operations
and that require management's most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effects of matters
that are inherently uncertain.
Revenue
recognition
The
Company recognizes revenue from the sales of products when persuasive evidence
of an order arrangement exists, delivery has occurred, the sales price is fixed
or determinable and collectibility is reasonably assured. Generally,
these criteria are met at the time the product is shipped to customers when
title and risk of loss have transferred.
Stock-Based
Compensation
The
Company periodically issues stock options and warrants to employees and
non-employees in capital raising transactions, for services and for financing
costs. Stock-based compensation is measured at the grant date, based on
the fair value of the award, and is recognized as expense over the requisite
service period. Options vest and expire according to terms established at
the grant date.
Construction
in Progress
Construction
in progress represents direct costs of construction or acquisition and design
fees incurred. Capitalization of these costs ceases and the construction in
progress is transferred to plant and equipment when substantially all the
activities necessary to prepare the assets for their intended use are completed.
No depreciation is provided until it is completed and ready for intended
use.
Impairment
of Long-Lived Assets
We
regularly evaluate our long-lived assets for indicators of possible impairment
whenever events or changes in business circumstances indicate that the carrying
amount of the assets may not be fully recoverable. An impairment loss would be
recognized when estimated undiscounted future cash flows expected to result from
the use of an asset and its eventual disposition are less than its carrying
amount. Impairment, if any, is measured using discounted cash flows.
In the period ended September 30, 2009, we performed an evaluation of our
long-lived assets and concluded there was no impairment.
Financial
Assets and Liabilities Measured at Fair Value
Effective
January 1, 2008, fair value measurements are determined by the Company's
adoption of authoritative guidance issued by the FASB, with the exception of the
application of the statement to non-recurring, non-financial assets and
liabilities as permitted. The adoption of the authoritative guidance did not
have a material impact on the Company's fair value measurements. Fair
value is defined in the authoritative guidance as the price that would be
received to sell an asset or paid to transfer a liability in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants at the measurement date. A fair value hierarchy
was established, which prioritizes the inputs used in measuring fair value
into three broad levels as follows:
Level 1—Quoted
prices in active markets for identical assets or liabilities.
Level 2—Inputs,
other than the quoted prices in active markets, are observable either directly
or indirectly.
Level 3—Unobservable
inputs based on the Company's assumptions.
The
Company is required to use observable market data if such data is available
without undue cost and effort.
Accounting
for equity-linked financial instruments denominated in currency other than
functional currency
On
January 1, 2009, the Company adopted authoritative guidance issued by the
Financial Accounting Standards Board (FASB) on determining whether an instrument
(or embedded feature) is indexed to an entity’s own stock. As a
result, certain options and warrants and the beneficial conversion feature of
the Company’s convertible preferred stock previously treated as equity are no
longer afforded equity treatment because the strike price of the warrants is
denominated in US dollars, a currency other than the Company’s functional
currency, the Chinese Renminbi. As a result, these instruments are
not considered indexed to the Company’s own stock, and as such, changes in the
fair value of these instruments will be recognized currently in earnings until
such time as the options, warrants, or beneficial conversion feature are
exercised or expire.
Accounting
for noncontrolling interest
Effective
January 1, 2009, the Company adopted guidance issued by the FASB on
noncontrolling interests in consolidated financial statements which established
accounting and reporting standards for a noncontrolling (minority) interest in a
subsidiary and for the deconsolidation of a subsidiary. This statement clarifies
that a noncontrolling interest in a subsidiary is an ownership in the
consolidated entity that should be reported as equity in the consolidated
financial statements. This did not have any material impact on the Company’s
financial condition and results of operations. However, it did impact the
presentation and disclosure of noncontrolling (minority) interests in the
Company’s condensed consolidated financial statements. The presentation and
disclosure requirements were retrospectively applied to the condensed
consolidated financial statements. As such, all prior periods
presented have been conformed to current year’s presentation. The
noncontrolling (minority) interest relates to third party shareholders of XHBD,
who own 49% of XHBD as of September 30, 2009.
Recent
Accounting Pronouncements
In June
2009, the FASB issued authoritative guidance on accounting standards
codification and the hierarchy of generally accepted accounting principles
(“GAAP”) effective for interim and annual reporting periods ending after
September 15, 2009. The FASB accounting standards codification (“ASC,
“Codification”) has become the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in accordance with GAAP. All existing
accounting standard documents are superseded by the Codification and any
accounting literature not included in the Codification will not be
authoritative. However, rules and interpretive releases of the SEC issued under
the authority of federal securities laws will continue to be sources of
authoritative GAAP for SEC registrants. Beginning with the
quarter ending September 30, 2009, all references made by the Company to GAAP in
its condensed consolidated financial statements use the Codification numbering
system. The Codification does not change or alter existing GAAP and, therefore,
it does not have an impact on our financial position, results of operations and
cash flows.
On July
1, 2009, the Company adopted authoritative guidance issued by the FASB on
business combinations. The guidance retains the fundamental requirements that
the acquisition method of accounting (previously referred to as the purchase
method of accounting) be used for all business combinations, but requires a
number of changes, including changes in the way assets and liabilities are
recognized and measured as a result of business combinations. It also requires
the capitalization of in-process research and development at fair value and
requires the expensing of acquisition-related costs as incurred. We
have applied this guidance to business combinations completed since July 1,
2009. Adoption of the new guidance did not have a material impact on our
financial statements
On July
1, 2009, the Company adopted authoritative guidance issued by the FASB on
accounting and reporting for non-controlling interests. Non-controlling
interests are to be reported as a component of equity separate from the parent’s
equity, and purchases or sales of equity interests that do not result in a
change in control are to be accounted for as equity transactions. In addition,
net income attributable to a non-controlling interest is to be included in net
income and, upon a loss of control, the interest sold, as well as any interest
retained, is to be recorded at fair value with any gain or loss recognized in
net income. Adoption of the new guidance did not have a material impact on our
financial statements.
On
January 1, 2009, the Company adopted authoritative guidance issued by the FASB
which amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset. This pronouncement requires enhanced disclosures
concerning a company’s treatment of costs incurred to renew or extend the term
of a recognized intangible asset. Although this may impact our
reporting in future financial periods, we have determined that the standard did
not have any impact on our historical consolidated financial statements at the
time of adoption.
In
June 2009, the FASB made an update to consolidation of variable interest
entities. Among other things, the update replaces the calculation for
determining which entities, if any, have a controlling financial interest in a
variable interest entity (VIE) from a quantitative based risks and rewards
calculation, to a qualitative approach that focuses on identifying which
entities have the power to direct the activities that most significantly impact
the VIE’s economic performance and the obligation to absorb losses of the VIE or
the right to receive benefits from the VIE. The update also requires ongoing
assessments as to whether an entity is the primary beneficiary of a VIE
(previously, reconsideration was only required upon the occurrence of specific
events), modifies the presentation of consolidated VIE assets and liabilities,
and requires additional disclosures about a company’s involvement in VIEs. This
update will be effective for fiscal years beginning after November 15,
2009. The Company does not currently believe that the adoption of this update
will have any effect on its consolidated financial position and results of
operations.
In
October 2009, the FASB issued authoritative guidance on revenue recognition that
will become effective for us beginning July 1, 2010, with earlier adoption
permitted. Under the new guidance on arrangements that include software
elements, tangible products that have software components that are essential to
the functionality of the tangible product will no longer be within the scope of
the software revenue recognition guidance, and software-enabled products will
now be subject to other relevant revenue recognition guidance. Additionally, the
FASB issued authoritative guidance on revenue arrangements with multiple
deliverables that are outside the scope of the software revenue recognition
guidance. Under the new guidance, when vendor specific objective evidence or
third party evidence for deliverables in an arrangement cannot be determined, a
best estimate of the selling price is required to separate deliverables and
allocate arrangement consideration using the relative selling price method. The
new guidance includes new disclosure requirements on how the application of the
relative selling price method affects the timing and amount of revenue
recognition. We believe the adoption of this new guidance will
not have a material impact on our financial statements.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not or are not believed by
management to have a material impact on the Company's present or future
consolidated financial statements.
Commitments
Construction
in Progress
In May
2003, the Company acquired a land use right for approximately 28 acres of land
in the Tianzhu Export Processing Zone, Shunyi District, Beijing, China, which
the Company plans to develop into a laboratory and bio-manufacturing facility in
compliance with Good Manufacturing Practices, or GMP, regulations primarily
for clinical trials of our vaccine candidates. The general plans for development
include the construction of a laboratory facility (“Phase One”) and construction
of an administrative office building (“Phase Two”). At September 30, 2009, the
Phase One construction and internal clean room are awaiting the inspections and
approval from the government, which is expected to be finished by the end of
2009, and is recorded as construction in progress. At September 30, 2009,
$35,144 was due to the contractors of Phase One for the completed construction
and internal clean room decoration and this obligation is recorded as due to
contractors. The Company expects that the Phase One will be fully in operations
before year end of 2009
At
September 30, 2009, Phase Two was still in the design stage. The Company
estimates the total project costs for Phase Two will be approximately
$1,200,000.
The
Company estimates that construction may begin on Phase Two in 2011 or later, but
currently has no plans for Phase Two construction.
Lease
Commitment
As of
September 30, 2009, we had future minimum lease payments of $7,126 and $19,004
due in 2009 and 2010, respectively, related to the operating lease for our
office in Oak Brook, IL.
Royalty
and License Arrangements
Liang
Qiao, M.D., our co-founder and chief executive officer, is one of the two
co-inventors of our core technology that was assigned to Loyola University
Chicago in April 2001. Under an agreement with Loyola University Chicago, we
have obtained exclusive rights to this technology for use in its future products
within the United States, Japan and the People's Republic of China, including
mainland China, Hong Kong, Taiwan and Macau. The license continues perpetually
or for the maximum period of time permitted by law, unless terminated earlier
under the terms of the agreement. Pursuant to this agreement, Loyola receives a
royalty of 4% from the net profit for all uses of the licensed technology,
including uses under sublicenses. As of September 30, 2009, we had not
generated any revenues from the sale of any products under development, nor had
we received any revenues from sublicenses.
Joint
Venture
On June 9, 2009 Bio-Bridge Science (HK)
Co., Ltd., a wholly
-owned
subsidiary of Bio-Bridge Science, Inc. entered into an equity joint venture
contract with JR Scientific Inc., a California based manufacturer of classical
and custom cell culture medium and sera products (“
JRS”
) and several other investors, to
form
a new cell culture medium joint venture
in Beijing, China. The registered capital of the joint venture will
be RMB 10,000,000 (approximately US$ 1,464,000). We will invest RMB
5,100,000 (approximately US$732,000) in cash in the joint venture for 51% of
t
h
e equity and JRS will contribute
certain technology for 15% of the equity. The balance of the equity
will be purchased by other investors.
On October 16, 2009, Bio-Bridge Science
Inc. received a business license from the Beijing Administration for Industry
and Commerce of the PRC indicating approval of the formation of Bio-Bridge JRS
Biosciences (Beijing) Co., Ltd. (“Bio-Bridge JRS”). Bio-Bridge JRS was
established at the end of October 2009.
Contractual
Obligations
Payments
due under contractual obligations at September 30, 2009 mature as
follows:
|
|
Payments due by period ($ in thousands)
|
|
Contractual Obligations
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 to 3
years
|
|
Lease obligation
|
|
$
|
26
|
|
|
$
|
26
|
|
|
$
|
0
|
|
Payable
to contractors
|
|
|
35
|
|
|
|
35
|
|
|
|
|
|
R&D
agreement obligation
|
|
|
5
|
|
|
|
5
|
|
|
|
—
|
|
Total
|
|
$
|
66
|
|
|
$
|
66
|
|
|
$
|
0
|
|
Item
3. Quantitative and Qualitative Disclosure about Market Risk
The
Company is a smaller reporting company and is not required to provide the
information required by this.
Item
4. Controls and Procedures
Evaluation
of disclosure controls and procedures. As of the end of the period covered by
this report, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended. Based upon that
evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were not
effective as of September 30, 2009 at the reasonable assurance level due to the
material weaknesses described below.
Management
concluded that an accounting error had been made in the Company’s historical
March 31, 2009 financial statements in relation to the adoption of provisions of
EITF 07-5, "
Determining
Whether an Instrument (or Embedded Feature) is Indexed t
o an Entity
’
s Own Stock
”. As
a result, the Company’s financial statements for the quarter ended March 31,
2009 were restated.
Management
evaluated the impact of this restatement on our assessment of our disclosure
controls and procedures and concluded that the control deficiency that resulted
in the incorrect recording of the adoption of provisions of EITF 07-5
represented a material weakness.
During
the third quarter of 2009, there has been an ongoing focus on
addressing the material weaknesses in disclosure and financial reporting
controls. The remedial actions undertaken include periodic review of our
accounting treatment in accordance with the US GAAP and related accounting
pronouncements. We had hired capable accounting personnel in the second quarter
of 2009.
The
Principal Executive Officer and the Principal Financial Officer anticipate that
the remedial actions and resulting improvement in controls will generally
strengthen our disclosure controls and procedures, as well as our internal
control over financial reporting (as defined in Rules 13a-15(c) and
15d-15(e) under the Exchange Act).
Changes
in Internal Controls over Financial Reporting
Other
than the remediation activities noted above, there were no changes to the
Company’s controls over financial reporting during the quarter ended September
30, 2009 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal controls over financial reporting.
PART
II - OTHER INFORMATION
Item 1.
Legal
Proceedings
Not
applicable.
Item
1A. Risk Factors
There
have been no material changes in the risk factors previously disclosed in Form
10-K we filed with the SEC on March 31, 2009.
Item 2.
Unregistered Sales of Equity
Securities and Use of Proceeds
Not
applicable.
Item 3.
Defaults Upon Senior
Securities
Not
applicable.
Item 4.
Submission of Matters to a Vote of
Security Holders
Not
applicable.
Item 5.
Other
Information
Not
applicable.
Item 6.
Exhibits
The
exhibits listed in the Exhibit Index are filed as part of this
report.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bio-Bridge
Science, Inc.
|
|
|
|
|
|
/s/
Dr. Liang Qiao
|
|
Dated:
November 16, 2009
|
By:
Dr. Liang Qiao
|
|
|
Chief
Executive Officer
|
|
|
EXHIBIT
INDEX
3.1(i)*
|
Certificate
of incorporation of the registrant, as currently in
effect
|
|
|
3.1(ii)*
|
Bylaws
of the registrant, as currently in effect
|
|
|
3.1(iii)**
|
Certificate
of Designation of Series A Preferred Stock
|
|
|
4.1**
|
Form
of Common Stock Warrant Agreement dated January 2007
|
|
|
4.2**
|
Registration
Rights Agreement dated January 2007
|
|
|
31.1
|
Certification
of Chief Executive Officer
|
|
|
31.2
|
Certification
of Chief Financial Officer
|
|
|
32.1
|
Section
1350 Certifications of Chief Executive Officer and Chief Financial
Officer
|
*
Previously filed with the Securities and Exchange Commission pursuant to
Registration Statement No. 333-121786.
**
Previously filed as an exhibit to the Registrant's Form 10-KSB for its year
ended December 31, 2006.